7 Tips for Managing Your Business Expenses More Effectively

Business expenses can add up quickly. Before you realize it, you've exceeded your monthly budget without even knowing how the money was spent -- and with no chance of recouping your loss.

Whether you're spending too much on supplies or not charging enough for your products, the good news is that you can learn to take control of your business expenses and take steps to improve your ROI numbers. Here are seven tips to help you take stock of how much you're spending, how much you're making and where you can make cuts.

1. Renegotiate Contracts at Least Once a Year

It's a good idea not to let the life of any contract exceed past the one-year point. By renegotiating your contracts with clients, vendors and suppliers once a year (or even every six months), you'll have better control over factors such as inflation, as well as circumstances (such as employee loss and turnover) that can affect productivity.

2. Prioritize Your Spending

Those renovation plans for your office might be tempting, but it's more important to invest in things that will make your employees happier and more productive, such as better lighting or new computers and printers. If you prioritize your spending, your money will go directly into components that will bring back a healthier ROI.

3. Invest in an ERP System

An enterprise resource planning (ERP) system is a suite of software applications that can help you organize and manage purchasing, inventory, storage, accounting and finances. This single platform can help you take control by giving you instant access to expense records, inventory/operational costs, sales and other essential financial data. By leveraging this information, you can create a budget that can increase your ROI.

4. Ask for Discounts

In today's competitive business world, don't be afraid to ask for discounts from your suppliers and vendors. Be sure to train your staff to ask for discounts too. These can be in the form of cash/credit discounts, but can also involve trades, such as swapping free warehouse storage for free freight services.

5. Delegate Tasks So You Can Use Your Time More Efficiently

Time is money. By delegating tasks to other employees, you can free up your time for negotiating deals. For example, instead of spending several hours a week working out employee schedules, hand the task over to a staff member. This gives you the time to work on more financially-lucrative things, such as working one-on-one with clients and vendors, or going over your budget.

6. Re-adjust Your Profit/Loss Projections

If you're losing money, then you need to re-adjust your profit/loss projections for the coming months. Take into account factors such as current costs, inflation and employee productivity, and balance these factors against a realistic projection of sales -- with "realistic" being your keyword.

7. Take Complete Control

When it comes to expenses, don't allocate control to anyone else. It's crucial to personally track and approve all expenses coming in and out. This means carving out a time slot every day to go over budgetary outlay and return, from the smallest orders for office equipment to the largest equipment purchases. Plus, every large equipment purchase should be considered carefully. Will it achieve a sufficient ROI to justify the cost? Likewise, sales should be carefully monitored. Did your latest shipment meet expectations, or should you have charged more?

Start at the beginning by developing a monthly budget and sticking to it. This budget should cover not only operational/equipment/employee expenses, but should also cover every scrap of paper and ink cartridge for the printer.

Finally, talk to your department heads to make sure that everyone is on the same playing field when it comes to sales and expectations. By working with your staff on expenses, you'll get full disclosure on where the biggest money leaks are -- and how to stop them.